5 Reasons To Be Optimistic About Student Loan Debt

There’s been a lot of news about student loan debt, and how it’s gotten out of control, now rivaling mortgage debt as the biggest and potentially problematic type of debt out there.

Some even suggest that the debt is worse than any other debt, because unlike most debt, you can’t erase it via bankruptcy. So, once you have student loan debt, for all intents and purposes, you’re stuck with it.

The government has even stepped in to reduce the impact on student loan debt, especially for those who aren’t making a lot of money, to make it so that the debt doesn’t prevent them from ever getting their heads above water.

It’s all doom and gloom, really. So, I thought I’d take a potentially contrarian view, and offer an optimistic view.

My optimistic thought is this: What if the current level of debt is as bad as it gets?

Before you say, “Ah, Beagle, you’re crazy. We’re doomed,” consider this thought: One of the reasons we racked up student loan debt is because, until recently, everybody told us it was OK.

See, student loan debt has always been thought of as OK debt. Why? Because it was an investment.

How was it an investment? Because you got a college education, which for the most part, ensured that you would get a better paying job, therefore allowing you to pay the debt back.

By and large, that all worked. Until the most recent recession, when it was revealed, that for the first time, well, ever, that college graduates weren’t finding jobs at that much faster a rate than those without college degrees, and many of those that were weren’t making enough of a difference to justify the student loan debt.

That sucks.

But, my optimistic view comes in, wondering if we’ll be able to learn lessons from it.

Here’s a few ways I think we could learn from our current student loan situation:

We’ll understand the costs better going in – How many high school kids really understand how much college costs? Do they have an idea of what they might make and what living costs might be? If we take the current situation as a way to better educate high school kids (and their parents) up front, better choices could be made

Parents understand the importance of saving for their kids education – Many parents probably figured some debt was OK because a college grad always made more, so they didn’t set aside as much as they could have. If parents start setting aside more up front to offset the costs down the line, it could be less of a burden once the child graduates

Non-traditional views of college – I’ll admit, if you had suggested to me when I graduated high school in 1992 that I should spend a year or two at a commuter school or a community college, I never would have considered such a thing. Nowadays, this is becoming a more favorable option (and community colleges are stepping up to the plate with better course offerings). If students look at a non-traditional view of getting their degree, knowing that it could save them tens of thousands in loans, it could put less of a burden on grads.

Making a better commitment up front – Both during college and grad school, I was friends with a pretty substantial number of classmates who ended up not completing their degree. This seems like a big waste. Many people who don’t follow through end up with loans and don’t even have the benefit of a degree. If students take their education more seriously and have better guidance programs up front, better decisions could be made that could reduce this type of situation.

Buckling down – At the same time, I know a number of people with whom I started college that got their degree the year after I did. Why? Because they took an extra year to complete college. Now that the financial costs have been better publicized, if there is a commitment to completing degrees in the ‘traditional’ time frames, loan balances could be reduced.

Notice that each of my reasons has the word ‘If’. And, they are big ‘ifs’. But, they’re also important and I believe obtainable if we collectively educate our students, our parents, and even the educational institutions themselves.

What do you think? Is student loan debt spiraling out of control or could today’s eye-opening lessons provide the groundwork for a more stable path moving forward?

The elasticity of higher educaiton is a topic I'm going to write more about, but I think you're point #1 is accurate. This WSJ article states that spending has decreased on college in the last few years.

A little bit of education (about debt) that circulates through the populace could make a difference as you suggest. It might even spur some competition among colleges to compete for students through lower costs.

Maybe you're on the right track here beagle – if this crisis causes kids to step back and actually read what they are signing – it could be good. Unfortunately, I dont think that will be a long term situation, but if it does happen even for a year or 2 it would be beneficial!

I think both of your positions stated in your final question are applicable, actually. Loans are spiraling out of control, as college costs are increasing yet employment opportunities are decreasing. This unfortunate situation, conversely, has raised awareness of how important it is to make wise decisions. I suspect that some will take heed, and some won't.

I'm still a big believer in going to a 4-year university as an entry ticket into working adulthood. It was how I was raised, and I guess it's hard to shake that. But objectively, I think that it's necessary in an increasingly competitive job market. Graduate degrees are what undergrad degrees were a generation ago.

That said, it's vital to pay close attention to costs. I have a post coming up on this topic, which is why these thoughts are fresh on my mind now 🙂

It would be nice if parents could save more for their kids' education, but there are always going to be parents who can't or won't. I don't think their children should be punished (via high education costs) or prevented from getting a higher education.And sadly, right now, the cost of education everywhere is going up. As state's slash their budgets, the cost to attend state schools, even for in state students, goes up.There's also the fact that schools have realized that it's a money making proposition for 4 year degress to take 5 years to get. How can we really expect an 18 year old to know exactly what they want to do with their life? Part of the point of college is experimentation, figuring out what you like and don't like. Many schools have made it so that if you change your major even once, that adds a year to your education.

Imo college education is getting way to expensive, especially when one considers how many teenagers have no idea what they want to do with their life. Spending 30k per year to figure out what one wants to do is a very expensive proposition.

I enjoyed your fresh perspective. It is very easy to gloom and doom the student loan situation because that is what is always in the news. I think getting back to the basics of viewing a student loan as an investment would also make a big difference. Rather than blindly throwing money into your college tuition "investment", how about doing some research first. take a look at the graduation rate for your college, expected graduation time period. How are the career services offered on your campus. What is the job placement rate for your major. What is the average starting salary for your major. What do ACTUAL graduates of the program say about their job prospects. What assistance is the college going to give you in finding financial aid and reducing your costs. All this research could greatly influence where you invest your college tuition, and the ROI on that investment.

I agree completely with your article. I sometimes wonder if I wouldn't have made different decisions if I'd had more information. My parents told me not to consider the cost of college because they would take care of it, but I'm shocked now when I think of the amount of loans they've taken out for my brothers and me. I'm also shocked when I look at my loan balance and realize that as high as it is, it's still only a small fraction of what I spent on school. I did no research on what I would be making when I graduated, how much debt I would have, or how long it would take to pay off. I would also have never considered going to a community college or smaller state school and transferring to a better university later. I didn't consider coop programs or how internships and job experience would pay off later in life.

If I could go back and change things I wouldn't, because the decisions I made then led me to where I am now and those experiences helped shape me. Overall, I'm really happy with who and where I am. I do know, though, that when I have kids they will be better informed and better prepared for those decisions.

I like this view! I agree, most high schoolers are unaware of the impact loans will have on their life. And most parents fail to save — when I was in middle school and high school, I heard a lot of parents say, “Oh, my kid will get a scholarship.” When their kid didn’t get one, they relied on loans as Plan B.